Baker-Hughes Rig Count In, WTI Retraces

This week’s Baker-Hughes Rig Count is out and drilling operations have once again expanded. Active U.S. oil rigs have come in at 193, up four from last Friday’s count of 189. While not a tremendous gain, it marks the third straight weekly uptick and suggests that drilling is on the rise. Is the downturn in North American fracking over? That’s a tough question, but it looks like the industry may have finally bottomed.

On the WTI front, prices are holding firm above the $40.00 handle. This is a bullish sign for energy traders as fall seasonality is now upon us and the expected weakness in this market has yet to develop. However, an intermediate-term bearish bias remains warranted for global oil. COVID-19 demand questions and increased OPEC+ production are the key drivers of the downward pressure on the energy markets. On the other hand, potential Biden administration U.S. fracking bans and a slumping USD are poised to send crude oil prices higher. At this point, the U.S. election is shaping up to be a critical underpinning of the global oil complex.

Today’s rise in the Baker-Hughes Rig Count is a bit unexpected. However, there are some American regions where turning a profit with crude oil at $40.00 is feasible. If producers can secure low-interest financing, then drilling new wells may be a modestly attractive undertaking.

Baker-Hughes Up, WTI Down

November WTI crude oil futures are in the process of giving back Thursday’s gains. However, prices are still above daily topside resistance and are within range of September’s High ($41.72). 

Overview: Today’s increase in the Baker-Hughes Rig Count is positive for U.S. energy even though the figures remain near all-time lows. Perhaps this is the beginning of a trend and a long-anticipated recovery in crude oil.

On the WTI front, not much has changed since the plunge of early September. Prices have traded within a roughly $5 range for about a month, in a bullish fashion. Ultimately, this price action is bucking seasonal trends and supports a short-term bullish bias. Nonetheless, it’s tough to ignore the long-term fundamentals and buy WTI ahead of the U.S. election’s result becoming official.